India Top Performer, Rallies On FII Faith
The economy may be sluggish, the rupee weak and corporate earnings uninspiring, but foreign institutional investors (FIIs) bet big on the Indian markets in 2012, pumping in close to $25 billion. That sent the benchmark indices roaring into rally mode; while the Sensex soared 26%, the broader Nifty put on 27%, with the two outperforming not just their BRICS and Asian peers but also most developed markets. Only Germany’s DAX that has rallied more than 29% so far in 2012.
What seems to have convinced FIIs to shop for Indian stocks was the policy push, initiated by finance minister P Chidambaram, and the belief that growth might have troughed out. Of course, liquidity was abundant with most central bankers across the globe, opting for easy money policies.
“While global liquidity has rushed in to most emerging markets, compelling valuations and the fact that the government pushed through some reform added to the optimism of global investors,” said Andrew Holland, CEO (investment advisory), Ambit Capital.
India outperformed its BRICS counterparts spectacularly — Brazil’s Bovespa, Russia’s Micex and China’s Shanghai Composite added a meagre 5%, 7% and 1.5% respectively. India ranks as one of the best-performing markets globally too; major European markets have gained 6%-15% as have others including Dow Jones, S&P 500 and Nasdaq.
Money flowed in despite India’s macroeconomic headwinds, a widening fiscal deficit that could leave inflation elevated and a high current account deficit that could see the rupee weaken further. While FIIs
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